Collective health bets employers are fed up with health expenses

(Bloomberg) – Collective Health Inc., a startup offering tech-savvy tools for managing health benefits, has raised a fresh infusion of investor cash as it seeks to win over more employers fed up with a fragmented, costly market.

The San Francisco-based company, founded in 2013, is betting that growing dissatisfaction with rising health-care costs will lure more firms to its technology, which lets employers cut through the tangle of different benefits they typically administer.

To tout its services, Collective Health on Wednesday published a manifesto positioning itself as a part of a “movement” to reshape health care, and has put up billboards on U.S. Route 101 near San Francisco designed to catch the eye of executives stewing over high costs while they sit in traffic.

“Every CEO is in the healthcare business. Take Control,” one says.

The latest fundraising brought in $110 million from investors including Canadian insurer Sun Life Financial Inc.. The companies plan to bundle Collective Health’s products with Sun Life’s insurance coverage that helps U.S. employers cap their health costs. To date, Collective Health has raised a total of about $230 million.

Ali Diab, Collective Health’s co-founder and chief executive officer, said he sees increasing frustration with health intermediaries who aren’t doing enough to improve care or lower costs. He said that a planned employee-health venture unveiled by JPMorgan Chase & Co., Berkshire Hathaway Inc. and Amazon.com Inc. is evidence the industry is ripe for change.

“Corporate America is saying enough is enough,” Diab said in an interview. “Employers just don’t feel like they’re getting their money’s worth.”

Monitoring Spending

Collective Health offers employers a web-based platform to monitor spending and results in real time, along with a mobile app that lets workers manage their dental, vision and health benefits. The app also offers features like doctor search, wellness and telehealth. Employers contract with insurers to access their networks of doctors and hospitals, but the companies themselves pay the medical bills.

Collective Health covers 120,000 people across 30 employers, up from 30,000 two years ago.

“They’re going a little bit above and beyond, improving the employer and the employee experience, and helping in terms of controlling their health-care costs,” said Mark Dang, the practice leader for employee benefits at Hays, who’s helped companies switch to Collective Health.

Bloomberg previously reported that the company, whose investors include Alphabet Inc.’s GV and Founders Fund, was seeking investments at a $1 billion valuation. Diab declined to say what price tag the latest fundraising put on the company.

RH expects to reduce its medical costs by about 3% to 5% this year after switching to Collective Health, said Karen Boone, the company’s chief financial and administrative officer. Boone said she expects Collective Health will help the company adjust its benefits over time, limiting future cost increases.

“The status quo isn’t good enough,” she said. “We have to do something to get more control over the spend and more insight into how we manage it in the future.”

Collective Health says it has preliminary evidence its system can help save money. The company published a report showing its customers’ medical spending increased 0.1% from 2016 to 2017, based on data from the first half of each year. By contrast, consulting firm Mercer found average employer health costs rose 2.6% in 2017. Collective Health says some of the savings come from workers getting care at lower-cost locations.

Over time, Collective Health says it can help employers figure out more ways to limit cost increases and direct workers to care.

“We want to be able to measure in real time what’s working and what’s not,” Diab said.

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When I see quotes like this, “Every CEO is in the healthcare business. Take Control,” it makes me think how broken the health care system is. People don't start businesses to be in the health care business. They want to be in the business they are passionate about. They want out of health care, not in more. Get employers out of the business. Trying to give them tools to be in the business is supporting the status quo which is a broken system.